28Modern WoodWorking | AUGUST 2008www.modernwoodworking.com

Swedwood fills a voidIKEA brings its vision for manufacturing success to VirginiaBy Jeff Crissey

Employees apply the honeycomb insert between particleboard stiles on the Bürkle press line.

www.modernwoodworking.com 29Modern WoodWorking | AUGUST 2008

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In December 2006, IKEA and its manufacturing sub-sidiary Swedwood broke ground on the retailer’s first U.S. manufacturing operation in Danville, Va. On May 21, Swedwood North America officially opened the

doors on its 930,000-sq.-ft. facility, the first of four potential factories on the 209-acre site.

Swedwood’s appearance in the United States is largely a result of IKEA’s growing North American retail presence, with 35 U.S. stores and 11 Canadian stores and hopes to grow to more than 50 stores in the near future. In order to maintain its dominance in the low-price point of the furni-ture market, IKEA is relying on lower transportation costs and proximity to market to offset the costs of a new factory.

“Traditionally, the most expensive component of home furnishing retailing is the transport costs,” says Joseph Roth, director of public affairs for IKEA. “By minimizing those costs and bringing production closer to the end user, it allows us to further ensure affordable prices to our customers.”

In addition, IKEA’s strategy is to ship product directly from the Danville manufacturing facility when

possible to avoid the added costs of routing products through distribution centers.

At the Danville facility, Swedwood manufactures IKEA’s EXPEDIT bookshelves, LACK coffee and side

tables and BESTÅ modular entertainment systems, three high-volume product lines that have largely automated production processes using board-on-frame panel construction. Globally, Swedwood supplies between 80 percent and 90 percent of IKEA’s demand for board-on-frame furniture.

“We looked at products with high freight cost in rela-tion to price, products with global capacity constraints and

Amid furniture plant closings and consolidations over the last several years in towns like Martinsville, South

Boston and Pulaski, it is big news in southwest Virginia when a company announces its intentions to build a large-scale manufacturing facility there.

Swedwood’s production facility in Danville, Va., produces board-on-frame panels for IKEA’s EXPEDIT, LACK and BESTÅ furniture lines. The factory will supply much of IKEA’s North American demand for the three product lines.

LACK coffee table

EXPEDIT bookshelf

BESTÅ modular entertainment center

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low labor content,” says Jörgen Lindquist, North American vice president of Swedwood. “Our idea is to establish fur-niture factories where Swedwood can create and maintain an advantage for IKEA.”

“The Swedish culture is very much about con-trolling your own destiny – if you have a high-vol-ume seller that you can produce cost-effectively, all the more reason to do it yourself,” says Roth. “Board on frame is a technology and process that we believe we have mastered in regard to our products.”

Finding a homeSwedwood considered several key factors when choosing a location for its first U.S. production facility, including proximity to IKEA stores, sustainable supply of raw mate-

rial and industrial infra-structure. After initially considering sites from Vir-ginia to Georgia, Swed-wood narrowed its options to Danville and another site in North Carolina.

What ultimately led Swedwood to choose Dan-ville was the speed at which the company could break ground. Pittsylvania County and the city of Danville

Swedwood gets its legsIngvar Kamprad founded IKEA in 1943, selling accessories such as pens, picture frames and other housewares. Since his decision in 1951 to shift the company’s focus to furniture, the retailer’s approach has been to provide low-cost furniture to the market. In 1955, fearing IKEA was ruining the furniture retail market, competing Scandinavian retailers threatened to boycott furniture producers that sold product to the upstart company.

The move forced IKEA to source product from Eastern Europe – particularly Poland – and led to the company to begin its own furniture design. Throughout the Cold War, IKEA designed and engineered furniture that could be manufactured at the lowest possible cost.

When the Berlin Wall fell in 1989 caus-ing sweeping changes throughout Eastern Europe, IKEA recognized the potential for disruption among its suppliers. In 1991, the company founded Swedwood, a furni-ture manufacturing subsidiary, to stabilize its furniture supply.

In the last 17 years, Swedwood has grown to 38 manufacturing facilities in Sweden, Poland, Germany, Slovakia, Romania, Latvia, Hungary, Ukraine, Russia, and most recently in Portugal and Danville, Va. With sales of roughly $1.8 billion, the IKEA-owned sub-sidiary closely follows its parent company’s 15 percent to 20 percent annual growth rate.

In addition to its 22 sawmills, Swedwood operates two board mills to supply a limited amount of its own demand.

“We produce a low volume of HDF and particleboard compared to what we consume,” says Jörgen Lindquist, North American vice president for Swedwood. “But it is good for us to have the knowledge and understanding when it comes to discussions with our board suppliers. We strive for simplicity and the lowest total possible cost in the value chain.”

Currently, IKEA’s growth rate fuels one or two new Swedwood factories per year just to keep pace with demand. In 2007, the retail giant opened 21 new stores in 11 countries and projects to open 25 stores in 2008. Overall, IKEA employs 114,000 people, roughly 15,000 of which work within Swedwood.

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Founded in 1991, Swedwood now employs more than 15,000 people worldwide. To keep pace with IKEA’s growth, Swedwood brings one or two factories online per year to meet consumer demand.

“Our idea is to establish furniture factories where Swedwood can create and maintain an advantage for IKEA.” —Jörgen Lindquist

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already had much of the permitting and infrastructure in place, allowing the company to speed up its plans by several months.

“The county and the city officials did a tremen-dous job in getting a site pretty much taken care of with infrastructure,” says Lindquist. “That was of huge importance in our speed to start up here.”

The site preparation required grading 750,000 cubic yards of dirt and bringing in 1.6 miles of road and rail. In just over a year from the time Swedwood broke ground on the facility, the company began limited operations at the facility before officially opening in the spring.

“Throughout the construction process, the county, city and state were very proactive and involved,” says Jerry Mayo, professional engineer for A.G. Raymond & Company and project manager for the Danville facil-ity. “Granted this was a huge project, but it got the full attention of everyone – the teamwork and communica-tion was the best I’ve ever seen.”

Proximity to Swedwood’s machinery suppliers – including Bürkle and Biesse in Charlotte, N.C., Stiles

Machinery and Akzo Nobel in High Point, N.C., and Schelling in Raleigh, N.C. – is another advantage for locating the facility in Danville. Area unemployment nearly twice the state average and a large industrial labor pool have also benefitted Swedwood as it staffs its production facility, expected to employ 260 work-ers by the end of the year. When all four facilities are eventually built, the company expects to employ as many as 800 people. Local and state officials also worked with the local community college to set up a nine-week training and certification program for potential employees.

“There were 18 people in the first graduating class, and we ended up hiring all 18,” says Lindquist. “That is part of what we believe is going to contribute to our success.”

Mike Sexton, project manager for the Virginia Eco-nomic Development Partnership, says IKEA would like to have suppliers clustered for logistical advantages to consolidate shipping. In February, Polish mattress manufacturer and IKEA supplier Com.40 announced its plans to open a $36 million facility in Danville.

In 2007, IKEA opened 21 stores in

11 countries and

expects to open another

25 stores this year.

Globally, the retail giant

operates more than

275 stores in 36 countries.

32 Modern WoodWorking | AUGUST 2008 www.modernwoodworking.com

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“If we can co-load [with other IKEA suppliers] we will because we are supplying the same stores,” says Lindquist. “That helps IKEA reduce costs.”

Special considerationsWhat sets Swedwood’s factory apart from the now shut-tered facilities nearby is the concentration on high volumes of a limited number of SKUs, products engineered for manufacturability and a heavy reliance on automation. Plant engineers scrutinized every last detail – from variable speed drives on equipment and dust collection units to vertically mounted cable trays – to drive as much waste and excess cost out of the production line while increasing reliability.

“Swedwood and IKEA as a whole look at long-range benefits,” says A.G. Raymond’s Mayo. “They don’t have a fixed payback threshold per se, but they do consider what benefits lay beyond a payback 'norm' of 18 months. We were actually able to do some creative things that may not have the shortest payback, but long-term they will provide unquantifiable benefits. Swedwood came to the U.S. with its concept for four

buildings, and every ounce of the facility is set up for growth. It is very rare for a company to be looking out over a really long horizon and putting the investment up front to minimize production impacts and reduce downtime as they grow.” Substations, pump house and underground utilities are all in place and ready to be tapped into for future expansion when Swedwood brings the three other facilities online without disrupt-ing production at the first facility.

Swedwood implemented a great deal of redundancy in the planning phase, bringing in two systems for power, water and cable feeding the site. If one system should go down, the company can bring in the utility service from another direction to avoid downtime.

“Swedwood also considered redundancy in trans-portation options,” says Mayo. “A lot of facilities are truck-only these days, but Swedwood required truck and rail. The logic is redundancy provides options and improves its negotiating position. If there is a truckers strike or as fuel prices increase, they can use rail or vice versa as the situation dictates." MW

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